service industry, an industry in that part of the economy that creates services rather than tangible objects.

Economists divide all economic activity into two broad categories, goods and services. Goods-producing industries are agriculture, mining, manufacturing, and construction; each of them creates some kind of tangible object. Service industries include everything else: banking, communications, wholesale and retail trade, all professional services such as engineering, computer software development, and medicine, nonprofit economic activity, all consumer services, and all government services, including defense and administration of justice. A services-dominated economy is characteristic of developed countries. In less-developed countries most people are employed in primary activities such as agriculture and mining. The proportion of the world economy devoted to services grew steadily during the 20th century. In the United States, for example, the service sector accounted for more than half the gross domestic product (GDP) in 1929, two-thirds in 1978, and more than three-quarters in 1993. In the early 21st century, service industries accounted for more than three-fifths of the global GDP and employed more than one-third of the labour force worldwide. The simplest explanation for the growth of service industries is that goods production has become increasingly mechanized. Because machines allow a smaller workforce to produce more tangible goods, the service functions of distribution, management, finance, and sales become relatively more important. Growth in the service sector also results from a large increase in government employment.

Service Sector in India today accounts for more than half of India's GDP. According to data for the financial year 2006-2007, the share of services, industry, and agriculture in India's GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively. The fact that the service sector now accounts for more than half the GDP marks a watershed in the evolution of the Indian economy and takes it closer to the fundamentals of a developed economy.

Services or the "tertiary sector" of the economy covers a wide gamut of activities like trading, banking & finance, infotainment, real estate, transportation, security, management & technical consultancy among several others. The various sectors that combine together to constitute service industry in India are:

Trade Hotels and Restaurants Railways Other Transport & Storage Communication (Post, Telecom) Banking Insurance Dwellings, Real Estate Business Services Public Administration; Defence Personal Services Community Services Other Services

There was marked acceleration in services sector growth in the eighties and nineties, especially in the nineties. While the share of services in India's GDP increased by 21 per cent points in the 50 years between 1950 and 2000, nearly 40 per cent of that increase was concentrated in the nineties. While almost all service sectors participated in this boom, growth was fastest in communications, banking, hotels and restaurants, community services, trade and business services. One of the reasons for the sudden growth in the services sector in India in the nineties was the liberalisation in the regulatory framework that gave rise to innovation and higher exports from the services sector. The boom in the services sector has been relatively "jobless". The rise in services share in GDP has not accompanied by proportionate increase in the sector's share of national employment. Some economists have also cautioned that service sector growth must be supported by proportionate growth of the industrial sector, otherwise the service sector grown will not be sustainable. In the current economic scenario it looks that the boom in the services sector is here to stay as India is fast emerging as global services hub.

It was on the year 1910 when the thought that a craft may be used to bring shipments began. History suggested that a shaft of silk was the initial to be shipped in a plane. The conveyance was carried from Dayton to Columbus in Ohio. This was mentioned to be the initial protest of the air freight. In 1919, other conveyance took place. A converted bomber was shipped by the American Railway Express. The freight was 1100 pounds, and was ecstatic from Washington D.C to Chicago. Unluckily, the craft and the radiator froze had to home in Ohio. However, that didnt inhibit the people from using the craft as freight carrier. During the late 1920s, more airlines operated as freight carrier. The origination of the freight conduit was used for American business only. The air freight had helped them not usually in making the travel of goods hurriedly but moreover the swift gait of the process. Undeniably, the obsolete stages of the air freight business done a noteworthy growth. By the year 1927 to 1931 the number and size of the shipments had increased from 45,000 pounds to roughly a million pounds. Though there were a few bid at formulation and organizing the air freight business, the blurb air freight did not run until World War II ended. The tip 4 well known airlines namely: American, United, TWA and Eastern shaped the Air Cargo Inc. The primary assignment of the firm was to collect up and broach cargo. The Air Cargo was active until the finish of the world. But in 1944, United and TWA began to be eccentric and had their own air freight business. There were lots of tiny craft owners who longed for to segment of the air freight industry but were not accepted. The large airlines didnt similar to not as big airlines to run in the business. One reason for that was the probability that the tiny airlines might screw up the regular position of the industry. Another reason was the one-time didnt wish to be entangled in a competition. Unluckily, the tiny craft operators who attempted fell by the pavement. Theres usually one that survived- its called the Flying Tigers. The Flying Tigers

done it since it carried both army and municipal freight. And it was moreover well known before as the largest in air freight ship industry. In grudge of the great start, the air freight business wasnt building that much. It didnt work well in the business. Until someone in the name of Fred Smith nonstop up his new air freight well known currently as the Federal Express. The Air Freight Industry Today Federal demonstrate has been well known currently as one of the successful air freight carrier. With the assist of modern technology, it right away uses air freight program to be able to supply the needs of the customers. The air freight program is the ultimate enhancement for freight forwarders. It will resolve any problems in the network in addition to give you glorious and cost efficient services. Today the FedEx or the Federal Express is related with the (UPS) United Parcel. The two freight conduit is right away well known to be the many arguable and devoted air smoothness services in the country.

History of service industry

Services have always been with us : The world's oldest profession, for example, is part of the service sector. The history of the development of services, and more particularly the history of how economists and other social scientists have viewed services makes a fascinating story and one that is skillfully presented by Delaunay and Gadrey. Their story begins in the classical period where particular attention is paid to the views of Adam Smith. Smith was not concerned with service sperse, but rather made the distinction between productive and unproductive labor. In this Smith follows the Physiocrats, and his views that non-productive spending put restrictions on the formation of capital and therefore slow the development of the economy is reminiscent of the earlier Mercantilist views. The connection with

services is that his "unproductive labor" included workers such as the servants of wealthy individuals or of the state. Also included on his list were the military, the clergy, lawyers, medical personnel, writers and musicians, all professionals that we now include in the service sector. Smith's distinction between productive and unproductive labor was shared by later writers such as Ricardo, Malthus, James Mill, and others. Delaunay and Gadrey identify Heinrich Storch as one of the classical authors who appreciated the fact that service activities did produce value and classified John Stuart Mill as taking an intermediate position. Delaunay and Gadrey spend a full chapter on the contributions of Karl Marx, perhaps a somewhat excessive allocation given that they conclude in the end that Marx did not significantly extend the debate on services. Of course Marx's views were important for they influenced the national accounting systems of the Soviet Union and other communist countries, where services were not counted in national output and as a consequence service industries were often neglected. Delaunay and Gadrey then argue that the concern with services diminished until about the First World War by which time all activity was seen to provide a service, and the distinction between goods and services was no longer considered relevant. Only the Marxists persisted with the distinction between productive and unproductive activities. The next era in which services rose in prominence was the period 193070 with the development of national income statistics. Here the names of Colin Clark, Allan Fisher, and Jean Fourastie are prominent. It was in this period that the national accounts were divided into three subgroups; primary activities, secondary or industrial activities, and tertiary or service activities. This is the period when concern was first expressed about the productivity of the service sector, and when the growing importance of service activities in the economy was noticed. The classical dichotomy between productive and unproductive work, and the view that only durable commodities lead to wealth formation, and the corollary that any activity that does not produce a commodity is unproductive, seems somewhat strange to us today. Nevertheless in this distinction there may be a hint of one of the defining characteristics of some of the activities that we currently define as services. Consider, for example, the activity of transporting a commodity from one place to another. The transportation does not, by itself, produce utility. Indeed it would be preferable if the producer and the consumer were close enough to each other that transportation would not be required. Transportation exists because things are not where we want them to be, and the production of transportation is wasteful in the sense that it uses up resources that could otherwise be used to produce commodities that would increase utility. In this sense some services are "unproductive" for they do not directly lead to an increase in our welfare. The other extreme view, that all activity is productive and provides a service, is equally unfashionable, but again there is some justification for such an approach. It is

clearly true for any durable good, and is also true for many goods that are not usually considered as durable. We buy clothes because they provide a service by keeping us warm (or protecting our modesty) and we buy food because eating keeps us alive. Of course defining everything to be a service hardly helps in our task of differentiating between goods and services and identifying distinguishing characteristics, but this approach does highlight the importance of the earlier question of how services should be defined and how they should be distinguished from goods. The growth of statistical analysis and the measurements of GNP that gained prominence in the interwar period led to a renewed appreciation of the importance that services played in the economy. The growth of the service industry is well documented in the Economic Council of Canada Report and by several of the chapters in the NBER volume edited by Zvi Griliches. Michael F. Mohr documents the rise of the service industries in the period from 1960 to 1990, and Griliches, in his introduction, dates the beginnings of the acceleration of growth in the service sector to be about 1960. The share of services in GNP rose from approximately 40 percent to 60 percent from 1947 to 1990, while employment in services in that same period rose from approximately 40 percent to around 70 percent. This rapid increase in the service sector raised a number of fundamental questions and spawned several different research approaches. A projection of the service growth rate into the future prompted sociologists such as Daniel Bell (1973), to predict that economic activity would soon be almost conlpletely dominated by the service sector. As noted in Delaunay and Gadrey, Bell predicted that by the turn of the century the industrial sector could be as small as the agricultural sector had become by the 1970s (approximately 4 percent of the labor force). In addition to the rapid growth in the service sector, the Post Industrial Society literature emphasized the important role of knowledge, science and technology, the importance of professional and technical people, and suggested that fundamental changes in the value systems and forms of control in the society were taking place. These are all discussed in Delaunay and Gadrey. The idea that the economy could soon be dominated almost completely by service-sector industries prompted several forms of response from economists. Delaunay and Gadrey identify two strands of research, the first of which they call the Neo-Industrial Theory of Selfservice, associated largely with the work of Jonathan Gershuny (1978), which predicts that in the future more service production would take place in the home by the consumer using sophisticated consumer capital equipment. The other school, referred to as the Theory of Neo-Industrial Society, includes a diverse group of authors who emphasize, among other things, the important role of services in production and the critical role of technological change in service industries themselves. Also associated with this branch of theory are the authors who identify

the information sector as a more important distinction than service sectors themselves. Earlier contributions to this line of thought include Fritz Machlup (1962) and Edwin Parker (1975). To these two approaches could be added what the ECC calls the "manufacturing matters" debate to which Rudiger Dornhusch et al. (1988), and Gregory Schmid (1988) are important contributors. Even if one is not persuaded that the industrial sector is about to disappear, the growth of the service sector raises several important issues. Early authors on the service industries, including Victor Fuchs (1968) and William Baumol (1967), were concerned not only with the rapid growth of the service sector, but also with the fact that productivity in service industries did not seem to keep pace with productivity in manufacturing. Slow productivity growth in services was seen as a major problem and one that could well have contributed to the overall reduction of the growth rate in major industrialized countries. In his introduction Griliches identifies two possible explanations for these phenomena. The first is slow technological change in services associated with their labor intensity, along with potentially higher income elasticity of demand. The second relates to the difficulties associated with measurement of output and productivity, which may have resulted in a mismeasurement of productivity growth in service industries. It was this second concern that motivated the research contained in the Griliches volume, research that can be seen as an update of the earlier research by Fuchs (1968), also sponsored by the NBER. The question of why there has been such a substantial shift to service industries is considered in some detail by ECC. They identify and examine four traditional explanations. These four are "first, that consumer demand for services has increased faster than for goods; second, that labor productivity growth has been slower in services than in goods; third, that goods producers are now simply contracting out for services that were formerly produced in house; and fourth, that there has been strong growth in the intermediate demand for services as inputs to the production process" (ECC, p. 3 1). After examining personal expenditures on goods and services for the period 1971-86, ECC found that the income elasticity of demand for goods was actually higher than it was for services, and both were less than unity. They concluded that there was no statistically significant difference between these two elasticities. They also examined the distribution of total final exppnditure by consumers on goods and services and found there was no significant increase, or perhaps a small decrease, in the share of total domestic services accounted for by goods and services. The paper by Alan Heston and Robert Summers in the Griliches volume also adds support to the view that changes in consumer incomes cannot account for the growth of services. They report on some results from the United Nations International Comparison Project

(ICP) where cross-section studies on some 60 different countries were undertaken. The countries in the study range from low-income countries such as Ethiopia with a per capita GDP of $275 US to the United States with a per-capita income of approximately $1 2,000 US. One of their most interesting conclusions is that there is virtually no change in the share of services in GDP as GDP per capita increases. The second possible reason for the increase in the proposition of services in GNP examined by ECC is that the slow growth of productivity in the service sector has resulted in a relative increase in their absolute size. This argument was made by Baumol (1967) and has more recently been emphasized by Baumol, 486 Blackman and Wolff (1989). These authors describe the phenomena as the "cost disease" and argue that slow productivity growth, by increasing relative cost, has been responsible for the rising share of employment in the U.S. economy. These arguments have been reviewed by Rowthorn (1992), who concludes that while low productivity growth has been an important factor in the growth of services, demand factors have also played an important role. The ECC is also critical of this approach. They divide the service sector into dynamic services, traditional services, and non-market services and argue that, while productivity in services overall has been somewhat lower than in the goods sector (1.4 percent per year as compared to 1.8 percent per year) this has been largely due to a poor showing by traditional services and non-market services. Dynamic services have, in fact, had a larger productivity growth than have goods (2.0 percent year as compared to 1.8 percent). They note that the sector where productivity growth is lowest, namely non-market services with a small negative productivity growth per year, is also a sector that has not grown significantly over that time period. They also argue that there has probably been a bias in measurement of productivity changes in both goods and services, with an upward bias for goods and a downward bias Tor services. They conclude that very little of the growth in services can be attributed to differences in productivity. A third possible explanation for the growth of services is contracting-out. The argument is that many firms that traditionally performed service activities inhouse have found it more efficient to hire these service activities from independent service-producing firms. Thus firms that at one time employed their own lawyers now use the services of a law firm. In the first case these activities would be counted as output of the industrial sector to which they belonged, while in the second they would be attributed to the service sector. ECC examines this argument, and although they find that there have been some shifts to contracting out,

they conclude that this cannot be a major explanation fo the growth in the service sector. The fourth explanation is that the overall growth in services is a reflection of the increase in the demand for intermediate services. This possibility was discussed by Osberg, Wolff and Baumol (1989) and is examined in some detail by ECC. The argument is that the final products included in measures of GNP require a larger input of services than previously. ECC used an input-output model to test this hypothesis and found that there was no substantial increase in the extent to which services were used to produce final output. They thus conclude that although each one of the four possible explanations provides some increase in service activity, taken together they cannot provide a convincing explanation of the growth in the overall service sector. They therefore suggest a fifth possibility related to the "manufacturing matters" argument, originally developed to counter the advocates of the post-industrial society. The argument is that goods and services are very dependent on one another, that the expansion of the goods industries results in an expansion of services, and that the expansion of service output results in an increase in demand for goods. They show that the expansion of goods requires proportionately more services as inputs, and conclude that this interdependence of goods and services, and particularly the fact that the increase in goods production requires the expansion of the service 487 sector, may account for the increase in the overall proportion that services make up in GNP. The ECC analysis of the interrelation between services and goods is carefully done, but in the end is not completely persuasive. In particular, even if the output of goods requires the production of more services, this by itself does not suggest that the growth rate of services would be faster than for goods. Moreover, in a recessionary period with a fall in the output of goods, the ECC logic would seem to suggest a proportionately larger fall in the output of services. I am aware of no evidence that suggests that there has been such a relative change in the output of services. I am aware of no evidence that suggests that there has been such a relative change in the output of goods and services in the recent recession. One of the interesting features of the service economy has been the rapid growth in the service sector that has occurred since the 1960s. Early explanations seem to have taken it for granted that it was demand-driven, but recent research casts serious doubt on this explanation. No other completely satisfactory explanation has yet been provided, however, and thus the cause of the rapid increase in output of the service sector stills remains somewhat of a puzzle.